Alger targets US large-caps with second actively managed ETF

May 5th, 2021 | By | Category: Equities

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New York-based growth specialist Alger has launched its second ETF, a semi-transparent actively managed fund offering access to a high-conviction portfolio of US large-cap equities.

Dan Chung, CEO and CIO of Alger

Dan Chung, CEO and CIO of Alger.

The Alger 35 ETF (ATFV US) has listed on NYSE Arca and comes with an expense ratio of 0.55%.

The fund invests in 35 companies, selecting the “best ideas” sourced from Alger’s in-house analyst team.

Technically, the fund may invest in stocks of any market capitalization and from any exchange globally; however, it is expected to focus primarily on US large-caps.

Currently, the portfolio has minor allocations outside of the US, specifically to Canada (2.8%) and Argentina (1.9%).

Alger seeks out firms experiencing “Positive Dynamic Change” which it says can refer to traditional growth companies experiencing rapidly growing demand as well as other companies benefitting from new regulations, product innovation, or new management.

The strategy is essentially identical to that executed by the Alger 35 Fund which launched in March 2018 and has since delivered a gain of 28.6% compared to 16.8% for the S&P 500 (as of 31 March 2021).

The strategy has performed particularly well in the post-Covid environment, notching up a return of 84.9% over the past year versus 56.4% for its benchmark. This outperformance may be partly explained by the fund’s strong leaning towards information technology stocks which currently account for approximately 40% of the total portfolio weight, roughly 15 percentage points higher than the S&P 500.

Alger previously launched the Alger Mid Cap 40 ETF (FRTY US) in March of this year. This fund follows a similar high-conviction strategy, although in this case holding 40 stocks primarily from the US mid-cap segment.

Both ETFs utilize Precidian Investment’s ActiveShares ETF structure which combines the benefits of a traditional ETF with the flexibility and confidentiality of an actively managed mutual fund.

Dan Chung, CEO and CIO of Alger, said: “We launched our first focused strategy in 2012 and have seen increased client demand and notable asset flows into the strategies since then. By offering an actively managed ETF, investors can access our investment capabilities combined with the liquidity and potential cost benefits of an ETF vehicle.”

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